Detroit has declared bankruptcy. The images and descriptions of the city evoke a wretched ghetto. Meanwhile, if you cross the border to Windsor, Ontario you find a relatively nice place.

Both cities have economies heavily invested in automobile manufacturing. Both cities also have various welfare systems available. They are both rife with municipal regulations. Canadian and American cultures are fairly similar.

So what’s the big difference?

Detroit’s bankruptcy filing lists about $18-20 billion worth of debt. Even if you low-ball it, this amounts to debt of about $26,000for everyone in Detroit. This is a city where the average per capita income is a pathetic $14,700 per year.

Windsor’s debt is around $115 million. They have about a third of Detroit’s population. Windsor’s debt per capita is $545 only.

Debt is not bad. The key is to use the debt for something productive. Since all government spending is inherently wasteful, cities should spend as little as possible and minimize their debts. Otherwise they will become Detroit.